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Wage and employment growth overshadowed by data on quarantine

Wage growth continues to accelerate

According to GUS data published today, nominal wage dynamics in the sector of enterprises employing more than 9 people rose to 4.1% YoY in August vs. 3.8% in July, running slightly above the market consensus (4.0%) and our forecast (3.9%). In real terms, corporate wages, adjusted for the changes in prices, increased by 1.2% YoY in August vs. a 0.8% increase in July. The slight increase in the nominal wage dynamics in August resulted from last year’s low base effects and lower wage pressure due to higher unemployment and reduced recruitment plans of companies. We expect the annual nominal wage dynamics in the corporate sector to stabilize in the coming months at a level close to 4% with wage growth being limited by the expected by us marked increase in unemployment in Q4 (further decrease in wage pressure) and measures taken by companies to reduce costs of labour amid continuing uncertainty about the course of the COVID-19 pandemic in the coming quarters. In 2021 wage growth in the corporate sector will be limited by a freeze in public wages.

Returns to work continue to be the main factor behind employment growth

According to GUS data, the dynamics of employment in the sector of enterprises increased to -1.5% YoY in August vs. -2.3% in July, running in line with the market consensus and below our forecast (-0.6%). In MoM terms, employment increased by 43.0k in August vs. an increase by 66.2k in July, recording its highest increase in August in history. According to GUS statement, the increase in employment in August compared to July resulted from the restoration of pre-pandemic working times, employees returning from care and sick benefits and unpaid leaves, and from new employment. Employment in August continued to be 150.9k lower from February 2020, namely the last month before the strong pandemic effect on the labour market.

Growing number of people in quarantine will limit recovery in consumption

The data released today indicate that the negative impact of COVID-19-drived regulations (mainly sick benefits and reduced working time) on employment and consumption is gradually abating. This supports our scenario in which consumption in Q3 2020 will not change compared to Q3 2019 vs. a 6.3% decrease in Q2. The expected significant increase in the number of people in quarantine due to COVID-19 (resulting mainly from procedures put in place in the case of infections in schools) who are unable to work remotely due to the nature of their jobs and, consequently, receive lower pay for the duration of sickness will pose risk to consumption in the coming months. This scenario is supported by the data released today by the Ministry of Health on the number of people in quarantine. The data indicate that between 4th and 16th September 2020 this number rose by 32.1k (compensating its one-off decrease by 27.0k on 3rd September mainly due to changes in the rules concerning quarantine) while the recorded yesterday increase in this number (by 9.2k) has been the highest since 5/4/2020.

Today’s data on wages and employment in the enterprise sector are neutral for PLN and bond yields, we believe.